tv Bloomberg West Bloomberg March 11, 2015 11:00pm-12:01am EDT
cory: live from pier 3 in san francisco, welcome to "bloomberg west." where we cover innovation, technology, and the future of business. i'm cory johnson. a check of your top headlines. the fed stress test results are out. they see whether banks can withstand losses. citigroup got the best results. bank of america got a conditional pass. deutsche bank and santander failed. american express, wells fargo, morgan stanley among those boosting dividends for buybacks.
secretary of state john kerry and ashton carter, and general martin dempsey testified before the senate foreign relations committee today. they urged congress to approve an expanded use of force against islamic states. iraqi forces detailed the stronghold of tikrit, a major step towards defeating the militants. box reported earnings for the first time. revenues were up 61%. they posted a loss of $47 million. they have been spending big-time to customers. shares are following in -- are falling in after-hours trading. shake shack shares also getting pounded in the after-hours trading after the burger chain's first report.
1.4 million dollar loss. krispy kreme reported sales up. $6.5 million. the former ceo of norwegian cruise line is suing virgin group and its founder sir richard branson. colin vech for a cruise ship and was $300 million for his effort. virgin announced the formation of virgin cruise in december. apples itunes back up after a major outage. it lasted until 1:00 this afternoon. consumers were unable to download apps or make purchases. there was a problem with icloud resolved in a few hours. now to the lead, alibaba group is investing in snapchat. the mobile application at a value of $15 billion. the biggest chinese e-commerce him when he will buy a big check to do that.
they were talking about raising $500 million and another round that would value them at $16 billion. joins us via skype, serena, big scoop. she is on the phone. we are glad to have you. this is a big deal. serena: it is. i'm at a conference in santa monica. the founder and ceo of snapchat will talk at 4:00 pacific time. it will be interesting to know what he says. knowing him he will not say anything. i learn that alibaba is investing for sure. evaluation of $15 billion. there are other investors in talks to invest.
i'm trying to break more news, but remember alibaba was in talks last summer to invest $10 billion, then they ditched the plan because it was before their ipo. cory: it's fairly interesting the notion they are investing while they are raising another round at a higher valuation. i wonder what the other investors would have to say about that, someone was able to get in before them and their round is going to be diluted. serena: we will see. we broke the news of the ground they are trying to raise. let's see what the final valuation is. the terms can always change. let's see how the emergence of these stories will affect the talks. i know from talking to people at this conference that is populated with venture
capitalists and a lot of wealthy private investors, the appetite for snapchat is huge. cory: indeed. i think one of the reasons is, if you look at the revenue side of things, things aren't that pretty for snapchat. the use case is a incredible. we have text messaging collapsing worldwide, messages on facebook messenger, on whatsapp, and snapchat growing enormously. is there a sense that alibaba wants to invest in snapchat, or snapchat wants to have an investor from china to get trade ." ." get ent -- from china to get entre in that market? serena: i mean, let's put it this way. when you do a deal you are and it together. i think they want to be in this
field together. alibaba has been known for investing its own money and tax startups in the u.s. and abroad. we know they invested in lyft and ride sharing companies competing with uber, and they have started investments. i'm sure they are putting $200 million is there sign of willingness. cory: when we look at the companies like whatsapp and instagram, through the usage of these services, the numbers are large. they are free to the user. that doesn't suggest a lot of revenue but they really are seeing a lot of usage. i was on the train this morning and watched a guy working through as a business guy, and a sports coat, and grown-up shoes, checking his snapchat, checking his e-mail, clearly a habit. that is what is happening around the world. serena: exactly. the user is tremendous. the revenue generation that snapchat started were generating
-- started working on generating revenues. i think the valuations are more projections of what they will be but investors are clearly willing to bet. cory: companies are giving these valuations while they are still private. serena: right. we are not seeing many tech ipos, especially not as big as this round. the big question is, how did this connect between the public market and private market will progress, and what will be the final outcome. cory: thank you for calling in. we appreciate that and the scoop. "bloomberg west" will be right back. ♪
impact on this is howard stern. his serious contract is up at -- his sirius contract is up at the end of the year. the future of radio is featured in this article. i asked if stern is playing hardball. felix: he lets these decisions go down to the deadline. he likes to have the drama play out on his show. he drops some hints. he compliments the current management. he hasn't made up his mind. cory: there are estimates he brings to an million dollars in -- brings $200 million or so in revenue to sirius. can they survive without howard stern? tuna: that is the question we ask.
the company has 27 million subscribers. we have done a lot of soul-searching to try to figure out how many of these subscribers would bolt if howard stern were to leave. frankly, i think it is difficult to know. it is safe to say there is a fair amount of subscribers probably in the millions, that would be impacted if this contract is not renewed. sirius is in a better position than it was in 2010 when his contract came up the last time. howard stern has more options out there where he could take his trade. it remains to be seen. there is the price the coveney could walk away from. cory: in terms of subscriber additions, this took off, from a revenue standpoint. it took off when howard stern joined.
he made this a viable entity. tuna: he did. what also happened is a very significant number of subscribers, when they joined the series platform, went on to discover other content the company offers. right now it is debatable whether those same subscribers would leave if howard stern -- but there is no question he is a big pool. there is a good chance, frankly, the company may not renew the contract. the company's $300 million per year on programming, on content, and while that pales in comparison to what a company like netflix spends, it is fairly significant. howard stern counts for a sick -- a significant portion of
that. cory: it is a big philosophical debate, howard stern puts it well in your article, he said the notion that it is not technology, it is stupid, if you want to be in radio forget podcast. podcasts are for losers. is going to a podcast going to apple something that he should take seriously? felix: there are so many different options for him at this point. they introduced their car play product last year. you can basically use your smartphone in your car to take over your dashboard. i can imagine google making a play for him with this new youtube subscription service. late night television, premium television like hbo, he could do a direct to consumer product over the internet. so many different options for him. in the end, he is going to consider staying with sirius xm. one thing to think about, he has worked hard to be a part of
sirius xm's growth. he is in a position to enjoy that. his show is doing really well in the sense that he is now getting the kind of a list celebrities he would not have gotten 5-10 years ago. he has madonna on his show today. he may want to stick around and enjoy what he has built. cory: let's get real about this. car play is interesting but only in a handful of cars. apple said it is going to be in 64 cars next year. estimates put it at 3 million cars only. maybe it is a loss leader for apple but does he have to go to a place where the company would make money, or is it enough he could be a loss leader for the company to drive a pandora, to drive adoption of their service? tuna: either way it is going to be a risky play for a company to bring him on anywhere close to what he is being paid at sirius xm today.
you have to look at how the business has evolved over the last decade since the relationship started. sirius is in a better position. they have been able to manage a price hike without defection. the automobile growth is back to the normal old levels. they were spending $200 and subscriber acquisition costs per gross ad. that is down to $30. you can look at a number of metrics and you can calculate if there were -- if they were to save the money they are paying howard, granted they are going to lose subscribers but it is easier to justify where that threshold would be with the company to walk away. as an analyst, you have to look at that end be very wary of the company overpaying.
cory: one wonders of technology matters. howard have this great quote where he said never think of me as a disc jockey. talent is what drives this. there is no sirius without talent. it comes down to that. is talent driving the show or is it technology enabling that? felix: part of it is the talent. jim myers, the ceo who i sat down with, says he wants to keep howard. at the right price. he is working hard to keep his talent happy. they tried to move the start of the show back to 7:00 a.m., they threw a lavish parter party -- a lavish party to him. part of it is keeping howard happy.
i think he cares less about the technology. they have mobile apps now, see you can listen to his show on your smart phone. you can listen to it on demand. i think he appreciates that. ultimately from his perspective, it is about, he feels like he can take his audience and they will follow him wherever he goes. cory: real quick. tuna: the used car market, the companies barely scratching the surface there, that is one area they are going to need him and probably go all the way out to try to keep him. cory: check out the article and bloomberg businessweek. bloomberg wes will be right back. ♪
cory: in a landmark decision, a jury has decided pharrell williams and robin thicke have crossed the line in recording their 2013 song "blurred lines" from borrowing too much from marvin gaye. ♪ that tune is great, so is marvin gaye. they will have to pay the family $7.5 million for copying the classic "got to give it up." joining me now, a specialist in copyright songwriting. this is a tough one, knowing the songs so well.
where does inspiration stop and copying begin? jason: it has surrounded the industry for a long time. cory: like ever. jason: at the end of the day the copyright statute looks at a couple of different things. one of which is a test that looks at everything objectively. it examines the musical pieces itself and make the determination whether there is substantial similarity. on the flip side there is a subject of tests that looks whether a reasonable person would think this is copying. you have those two pieces of thought hitting each other. cory: therefore this strikes me as not that similar. the songs are clearly, there is an influence. what musician isn't influenced by marvin gaye? you can't do rmb and know his
work. jason: at the end of the day there is a train of thought here that that an award like this is a big win for music companies and music publishers who own very large substantial catalogs and the value of these historical pieces of music will go up. in actuality, most in the music business look at this as actually a stifling of musical evolution. as you said, there isn't really a situation ever and music where a feeling of an era is incorporating to new music. at the end of the day songwriters harken back to their legends to write music. that is a big part of how our progresses. -- how art progresses. cory: in the early 1990's as
hip-hop became mainstream the music publishing business went from licensing songs to licensing samples. i wonder if the evolution of that business and the codifying of laws around sampling change the rules of the road in terms of the interpretation of musical influences. jason: there is a point to be made that the pattern of music popular music -- the pattern of popular music over the past 20 years has used the sampling where the musical recordings used in the underlying track and interrelations where songwriters -- and interpolations where songwriters utilize pieces of prior works in their new derivative works. that has become a big pattern over the years. yet seen it as far back as george harrison and michael bolton, as well as a very big case, the verve using rolling stone's songs in bittersweet symphony. the rolling stones got 100% of the royalties.
cory: it was stolen. it was clearly their 10 that was -- their tune that was recorded and used as a background. jason: in that instance that is correct. there was a license in that case where there was a license, a sampling license, but the license was -- they used to much based on what the license said they were allowed to use. to your point, the music business has definitely evolved to a case of using prior art very much in current art. obviously songwriters and music publishers deserve the right to get paid for their prior art. at the same time i think that the courts have to be very careful about stifling creativity. cory: robin thicke and for pharrell williams on one side, marvin gaye on the other. jason: i love them all. the classics one this one.
cory: you are watching "bloomberg west." let's check on some top headlines. john kerry says his reaction to the letter from 47 republican senators was one of utter disbelief. the letter warns iran that a nuclear deal with the u.s. could be reversed after obama is out of office. >> this administration is committed to making a deal. these 47 senators know and understand that he is going to make a bad deal and they want to make sure the leaders in iran know and understand this deal,
if there is one, may be overturned by the next president. cory: the letter ignores 200 years of foreign policy conduct. u.s. lawmakers are stepping up pressure on the federal reserve, demanding more information on an internal probe in 2012. orrin hatch says the letter to janet yellen -- he is the third lawmaker to put pressure on the fed. nasdaq has established a new energy futures market and plans to launch the market in the middle of this year pending regulatory approval. what does that mean for top ipos? >> it is not seen as a positive. we have to recognize how well we
have done in tech and in other industries. you have seen a broadening of the nasdaq brand. cory: verizon has agreed to offer more than 200 hours of mobile tv programming for teenagers and young adults. the dreamworks awesomeness tv channel -- that is what it is called, i am not making it up. in france, 15 armed robbers made away with $9.5 million worth of jewels. they fled in four high-speed cars. apple is crowdsourcing medical research with a new app.
they announced the big event on monday, where they also announced the apple watch. apple will take the data and share with doctors and scientists to use in medical research. it targets parkinson's, diabetes, and other diseases. will this really move the needle? our next guest thinks so. when i saw this announcement, it seemed ridiculous that limited information of how many steps i take, how many stairs i climb, how much i'm awake, can make a difference in medical research. eric: the advances we are seeing in these mobile health apps with sophisticated devices, you can do a lot more than track steps. you can connect to seamless devices. we will be able to have bluetooth enabled inhalers.
to assess the robustness of the respiratory tract. it is not just about the activity. cory: what data do researchers not have now? the ubiquity of iphones in this country seems like it could collect a lot, but what pieces of information are you really after? eric: the number of people that you need to understand complex diseases. what something like the iphone and the research kit enables is a broad canvassing of populations beyond what we can get in a local area. in the day are app was up, we had 25 people enrolled in our asthma study. that would take a classic researcher 1-3 years to accomplish that sort of enrollment using traditional means.
we typically collect data in research studies and snapshots single visits. by using the iphone, we can collect that data longitudinally. we can collect information to the course of somebody's life. cory: that is intriguing. i'm interested, the person is giving up loads of genetic data so they can become part of this giant cohort. you do not have a consistent tracking of said people. are we entering an era where there is a lot more data available for research about these diseases? eric: it enables you to generate deep sequencing information on your genome, but you need to connect that to your parameters of your system to make that useful.
what we can do now, we can be tracking all different, a myriad of parameters. heart rates, ekgs, inhalers. it will give us a wealth of physiological data to hook up to the kind of data that, when combined, will create the holistic picture on somebody's health. how best to target their disease, to classify their disease, and make them more well. cory: how did you come to work with apple? eric: how are we going to enroll or reach out and get more people who have certain diseases? how will we engage them in research? the bigger the data is, the more accurate the information becomes. apple is the perfect partner.
they are masters at user interfaces, user experiences. it was a very natural link. cory: interesting dichotomy where there is so much concern about privacy of health information, and at the same time, we are asking people to give up their data. you have the nsa trying to break into the apple iphone. and then we have people volunteering their most private information. eric: that is an excellent point. we have very secure communication. where the information is stored is highly secured. people are willing to give. if you use gmail, you are consenting to use gmail to give google access to all of your e-mails.
you do that because you get a meaningful service back. you are able to write e-mails, send big attachments. if we can engage people and provide them with meaningful guidance back on how to improve their health, they will forego some of the concerns they have. just like they do with yahoo! or gmail. cory: interesting stuff. thank you very much. ♪
miller: pretty complex. wearable devices make it possible to collect very personal terabytes of information daily about us. protecting that information, securing it, is critical. cory: i use this to figure out when i am asleep or how well i am sleeping, to monitor my steps. i should hit 10,000 today. that is not especially secret information. when i go to bed -- i suppose. miller: the initial release of iwatch is more of a front end. as applications become more prevalent with biometrics, the
device will be able to track anything connected to the internet. information becomes even more critical when it is shared with your physician or with a health care provider or with your company. the only way to protect that information is to encrypt it at the information data level. i think the first benefit of the iwatch is the fact that most of us use a four-digit pin code to access our iphone. with the iwatch, you will be able to have multi-factor authentication. in order to access any of the information generated on your phone or ipad or the watch, the physical presence of the watch combined with the passphrase will be required.
cory: forget the thumbprint. you then have a third level. miller: most of us use single factor authentication, which is easily crackable. our company has a smart encryption platform. we help companies around the world, 30,000 of them, encrypt information at the data level. it is persistent encryption that follows the information, whether it is on a mobile phone or wearable device. cory: you have to work with apple to develop such things. what are they like to work with? you are working with them about security. miller: one of the things that makes apple so useful, their developer environment and tools
are very prevalent. we use their development environment to create our apps and they are tested on every single device at apple. cory: when you look at apple security, it seems like they made a really big shift after the iphone3. we saw a big change. after the prism program happened, apple changed the way they collected data. do you see a connection? miller: you are actually right. the encryption part of protecting information is relatively easy. it is in managing the keys, that is where the complexity is. if you encrypted at the device and the user is the only one
cory: what were you doing in high school? michael hoffman is 17 years old. he lives in maryland and he just won one of the three top prizes in the intel talent search. michael joins us from washington, d.c. this is really interesting research. michael: i am 18, so it is not that impressive. cory: my bad. let's go on to the next segment. i did not know that sound could be measured.
why does it matter? michael: the long-term reason why this will be important, it helps create a room temperature superconductor. copper is a very good conductor. if we had a superconductor there would be no loss at all. you would be able to move power anywhere for free. cory: for decades, people have been trying to use optics at the semiconductor level. it has not really worked. do you think there is application in the world of semiconductors for this, to
control it enough or you can build semiconductors on this? michael: i am more interested in superconductors than semiconductors because they are more super. i think for things like computers, sound does not move fast enough. for certain things like diodes there might be applications. i could not think of any, but there are better minds than me. cory: i was told you got inspired to do this work by video games. seriously? michael: i did become interested in physics and used it to become very good at games. when i had to jump from one level to another.
cory: president obama, you will meet him later today? michael: yes, i am. all 40 of us finalists will see him. cory: we have a full screen that demonstrates what an optical lattice is. i was hoping you could explain. michael: sure. my model assumed a tight binding lattice, an artificial kind. what happens, you have a laser beam resonating in a cavity. the result would trap electrons
in very special places. cory: very interesting stuff. congratulations. have fun meeting president obama. michael, thank you very much. the bwest byte is one number that tells us a whole lot. what were you doing when you were 18? tim: not that. 178 billion. that is apple's cash pile. in the minds of investors at the annual meeting yesterday in cupertino asking tim cook, is there a potential deal with tesla in the cards? tim: he sidestepped it. there is no relationship with tesla.
at this point, he was just trying to sidestep. cory: the apple shareholder meeting is an interesting one. the former apple employees show up in great sizes. tim: lots of fans of the company. it is a different place than it was just a year ago. the record profit, day after the watch details emerge, a lot of investor optimism and a lot of consumer optimism. cory: we will talk about what we were doing at 18 when the cameras are off. you can get the latest headlines on bloomberg.com. ♪